Mahoney, Richard 1934–

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Richard Mahoney
1934–

Retired chief executive officer and chairman, Monsanto

Nationality: American.

Born: January 30, 1934, in Springfield, Massachusetts.

Education: University of Massachusetts, BS, 1955; LLD, 1983.

Family: Married Barbara Marsden Barnett, 1956; children: three.

Career: Monsanto, 1962–1965(?), product development specialist; 1965–1967, marketing manager for new products; 1967–1971, marketing manager for bonding products and divisional sales director; 1971–1974, sales director for agricultural division; 1974–1975, international operations director for agricultural division; 1975, general manager of the overseas division of the agricultural division; 1975–1976, corporate vice president and managing director of Monsanto Agricultural Products; Monsanto Plastics and Resins, 1976–1977, group vice president and managing director; 1977–1980, executive vice president; 1980–1981, president; 1981–1983, chief operating officer; Monsanto Company, 1983–1986, president and chief executive officer; 1986–1995, chief executive officer and chairman.

Awards: Frederick S. Troy Alumni Achievement Award, University of Massachusetts, 1981; Honorary Fellowship, Exeter College, Oxford, 1986.

■ As chief executive officer and chairman of Monsanto, Richard John Mahoney oversaw the transformation of a conservative and financially troubled chemical company into an innovative leader in biotechnology and pharmaceuticals. His goal was to make Monsanto recession resistant by reducing its exposure to business-cycle fluctuations and oil prices. He was known for his aggressive and demanding management style, maintaining high pressure on his subordinates, and keeping the company under his tight control.

TRANSFORMING MONSANTO

Mahoney began his career at Monsanto in 1962, working his way up in new-product development and sales. He made a name for himself in agricultural chemicals, Monsanto's most successful division. In 1976 he moved to Monsanto Plastics and Resins, becoming president in 1980 and chief operating officer in 1981.

By the late 1970s big oil companies were taking over the petrochemical industry. The cost of raw materials soared, and Monsanto had serious financial control problems. CEO Jack Hanley began to move the company into biotechnology. Hanley picked Mahoney to succeed him as CEO in September 1983 and as chairman in 1986.

In his first year as CEO, Mahoney drastically cut costs and businesses. He sold off Monsanto's petrochemical-based commodity chemical, paper, and polystyrene divisions that accounted for about $4 billion in annual sales. Although many analysts thought he had undersold them, they had no place in Mahoney's long-term strategy. Between 1986 and 1990, Mahoney sold off 18 Monsanto units, merged one, and closed another, while acquiring three new higher-margin businesses. He concentrated Monsanto's resources on specialty chemicals, agricultural products, pharmaceuticals, and biotechnology. During that period sales increased 31 percent to $9 billion, and earnings rose 26 percent to $546 million.

BUYING G. D. SEARLE AND COMPANY

In 1985 Mahoney bought Searle pharmaceuticals for $2.8 billion. Analysts thought that he grossly overpaid. He told Forbes in February 1986, "Our objective is to be one of the four or five major pharmaceutical companies." Mahoney doubled Searle's research budget to $200 million annually. Calan SR, Searle's drug for angina treatment, was remade into a popular medication for high blood pressure, with sales of $240 million in 1988. However, sales fell as generic versions were introduced. In addition, Searle faced hundreds of lawsuits over its Copper-7 intrauterine contraceptive device. Nevertheless, between 1985 and 1991, Searle's sales rose from $600 million to $1.5 billion.

As patents on Calan SR and Searle's NutraSweet, the best-selling artificial sweetener, approached expiration, Mahoney kept prices low, hoping for customer loyalty. He told Forbes in January 1992, "You dare not violate the customer's confidence." Instead, by lowering manufacturing and other costs, Monsanto challenged other companies entering the market because it was already a low-cost provider. When competition in the diet-soft-drink market threatened NutraSweet, Mahoney oversaw the introduction of several new products, including a low-fat ice cream.

PROTECTIVE STRATEGIES

Chemicals still accounted for about 60 percent of Monsanto's assets, and Mahoney continued to invest research and capital in those units as well as in agriculture and animal nutrition. As much as possible, Mahoney protected Monsanto's profitable businesses while its new divisions matured. Chemical products, including shatterproof windows, detergents, and stain-resistant carpets, still accounted for half of Monsanto sales in 1989.

In 1987 Monsanto's patent on Lasso—the most widely used herbicide in the United States for corn and soybean crops—expired. Mahoney threatened to discount Lasso for private-label distributors, discouraging competitors. New application methods and sales efforts for Lasso and Roundup—an all-purpose, globally best-selling herbicide and the most successful new chemical in years—boosted company earnings. When Roundup's patent expired in 1991, Mahoney slashed its price.

In 1992 Mahoney again restructured Monsanto's chemical operations, laying off 2,500 employees and closing several smaller plants. He was quoted in Forbes as saying, "Efficiency isn't doing less. Efficiency is doing smarter. Picking the right things to do and then doing them well" (January 6, 1992).

EARLY ENTRY INTO BIOTECHNOLOGY

According to a 1983 story in Forbes, Monsanto's young genetic engineers presented Mahoney with a diploma "For Mastering the Arcane Art of Molecular Biology" shortly after he became CEO. Mahoney told the magazine, "I think biotechnology will be at least as important to the chemical industry in the nineties as petrochemicals were in the thirties and forties" (October 24, 1983). He spent an unthinkable 10 percent of Monsanto's research and development money on biotechnology—$1 billion, which during the 1980s was an unthinkable amount. By 1984 he had spent $150 million to build a life sciences research center. Mahoney put venture capital into rising biotechnology companies, such as Genentech and Amgen, and linked Monsanto with university research.

Monsanto's first biotech product—bovine somatotropin—was a growth hormone for cows that increased milk production. Soon after developing the product, Monsanto introduced porcine somatotropin to grow leaner pigs. In addition to being one of the world's first biotechnology companies, Monsanto was considered by many analysts to be the best.

MANAGEMENT STYLE

Like his idol Winston Churchill, Mahoney concentrated on long-term strategy. However, he believed that a company as large as Monsanto required a 20 percent annual return on equity to become a great corporation. He was extremely tough. To reach this goals, Mahoney was extremely tough on his employees, raising the stakes as soon as he projected that a target would be met.

Mahoney was given to lecturing employees and making overstated pronouncements. A Monsanto executive told Fortune in February 1989, "I made a mistake on a trip once and he tore into me on the plane home. For the entire flight he told me that I wasn't living up to my potential." According to that article, subordinates viewed Mahoney as a man with a huge ego that constantly needed stroking. He listened but did not understand what others said and had little empathy for his employees. He did not believe that he could be wrong about anything. Some saw him as a great employee motivator. When asked to describe his style, Mahoney told Fortune, "I am demanding, not mean. Forgiveness is out of style, shoulder shrugs are out of fashion. Hit the targets on time without excuses" (February 27, 1989).

Monsanto had a reputation as a polluter, and growing environmental concerns lowered the reputation and credibility of the entire industry. In 1990, faced with having to report a 1987 release of 20 million pounds of toxic emissions, Mahoney decided to go on the offensive. He announced that within four years Monsanto would voluntarily reduce toxic air emissions to 10 percent of its 1987 levels. He went on the lecture circuit, touting Monsanto's environmental stewardship and arguing that the industry had to make environmental quality a top priority if it was to prevent the imposition of tough government regulations. Mahoney told Financial World, "Our overall goal is zero effect on public perceptions" (January 23, 1990).

Mahoney retired as Monsanto's CEO and chairman in March 1995, remaining a director and chairman of the executive committee for another year. He later became a board member and head of the governance committee for Union Pacific, the world's largest railroad.

See also entry on Monsanto Company in International Directory of Company Histories.